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They’re juggling a mortgage and college savings. Can they still retire early?

RESTON, VA. Scott and Elissa Blackerby, two federal government workers who live in Reston, are focused on whether they can afford to retire early, if they should pre-pay their mortgage and how they should draw down Social Security. (Photo by Jeffrey MacMillan for The Washington Post)

Scott and Elissa Blackerby have set aside a sizable nest egg.

But because of their age difference — Scott is 56, and Elissa is 43 — they’re wondering: Have they saved enough that they can afford to retire early?

As two people working in financial management for the government, they both qualify for federal pensions. They also have substantial retirement savings and a separate investment portfolio that can supplement their retirement income and potentially serve as an inheritance for their children.

Retiring early, in about six years or so, would free up time for them to travel, volunteer and be with their sons. “We’d like to maximize the years we have together,” he says.

Scott wants to know when he should begin drawing Social Security to get the most out of his benefits. The Blackerbys are trying to pay off their mortgage and credit-card debt, and they wonder about the best way to juggle that while they save for their youngest son’s college education.

We shared information about their finances with a two financial experts, Sacha Millstone, a senior vice president at Raymond James, and Chuck Riley, a senior financial adviser for Vanguard. They offered strategies the Blackerbys might want to consider as they get closer to retirement.

The big picture

Scott and Elissa, who together earn close to $300,000 a year, would both like to retire after Scott is 62. By then their son, now 12 years old, will be heading off to college and their mortgage should be paid off, which would reduce their living expenses.

Excluding savings and extra payments they make on their mortgage, the Blackerbys spend about $9,000 a month on food, housing, entertainment and utility bills. Those expenses should drop to about $5,000 in retirement if they pay off their mortgage and car loan and no longer have to pay for summer camp and other school-related expenses for their son. (Of course, new costs may arise after he starts college.)

If they succeed in eliminating their mortgage before they stop working, the savings in their Thrift Savings Plans should be enough to cover more than 25 years’ worth of expenses in retirement. They won’t be relying on those savings alone, however, because there’s a good chance most of their expenses in retirement will be covered by Scott’s pension and Social Security benefits, which he estimates will bring in about $70,000 and $22,500 respectively if he starts collecting at 62. Elissa will also qualify for a pension, but it may be reduced if she retires early. She won’t be able to start drawing it until she is 57.

Scott and Elissa also have an investment portfolio that they hope will serve as an emergency fund or help to cover their expenses in retirement.

With their younger son being roughly six years from college, they are putting money away into a 529 plan and another savings account for expenses not related to tuition. (Scott’s older son, who is 26, is out of college and working.)

In addition to their home in Reston, which is worth about $780,000, the Blackerbys own a rental property nearby that is paid off and worth about $600,000. They’ve been using the $2,000 they receive monthly from the rental home to make extra payments on the $260,000 remaining on their mortgage and want to know if they should continue or use the money for something else. As for other debts, Scott owes $5,000 on a credit card and Elissa has $12,000 remaining on her car loan.

From building to preserving

Even if Scott stops working at 62, he might want to delay collecting Social Security benefits until he is at least 66 or 70 to receive a bigger benefit, Millstone says. During those years, Blackerby could use his savings to cover expenses they can’t afford on his pension alone. That would allow his Social Security benefits to grow from about $22,500 a year at 62 to $32,300 at 66 and to about $40,700 at age 70. “You really have to do everything you can to stretch those dollars,” Millstone says.

Blackerby might not want to wait until 70, however, if his health changes or if their expenses grow unexpectedly in retirement, Riley says. In that case, collecting Social Security earlier would reduce how much they have to eat into their savings, protecting the money that Blackerby wants to leave behind for his wife and kids, Riley says.

Now that they’ve built up a substantial nest egg, the Blackerbys need to shift their focus from building their savings to preserving them, Millstone says. At the moment, about 90 percent of their retirement savings is invested in stocks and 10 percent is in bonds, leaving them at risk of having their savings depleted if the stock market collapses, Millstone says.

The Blackerbys don’t want to give up all of their investment growth by moving to cash, because they will still need to keep up with inflation, Millstone says. Deciding on the exact allocation will depend on their risk tolerance, but they may want to move closer to a balanced portfolio that is about 60 percent in stocks and 40 percent in bonds or even split evenly, Riley says.

Refining priorities

The Blackerbys have been spreading their money to make progress toward several goals, but they might want to think about targeting one goal at a time, Riley says. Instead of paying $2,000 extra on their mortgage each month, they could use that money to pay off other debts more quickly, he says.

For instance, if they paid off Scott’s $5,000 in credit-card debt, the cards would be cleared in two and a half months, he says. They could then use the money to pay off the $12,000 remaining on Elissa’s car loan within six months after that, making it possible for them to clear almost all of their non-mortgage debt by January.

Once that is done, they could use the $2,000 monthly, along with any money that was going to the car payments and credit-card debt, to fund their son’s savings account. (Any savings outside of a 529 plan that are meant to cover non-tuition expenses should be in the parents’ names, because a parent’s assets count less than a child’s assets when it comes to financial aid, Riley says.)

After they reach their target savings amount, they could go back to making the extra mortgage payments, which should still set them up to pay off the loan in about six or seven years, Riley estimates. Although, if they don’t finish before they retire, they should be collecting enough income to afford the payments in retirement, Millstone says. They could also decide to sell their home and move into the smaller rental property after their son heads to college, which would eliminate the mortgage payment and pad their retirement savings, she adds.

Insurance needs

As a federal worker, Scott should be able to keep his health insurance after he retires, a policy he says should also cover his family. However, they should consider buying long-term care insurance while they are still in their 40s and 50s because those policies get more expensive with age, Millstone says. The coverage could prevent them from depleting their retirement savings to pay for a home health aide or assisted living if their health-care needs change in retirement, she says.

Their financial plan should also account for how Scott’s wife and children would be cared for after he dies. As a widow, Elissa would be eligible to receive about half of Scott’s pension, income that she could supplement with her own pension, Social Security benefits and retirement savings.

Scott might want to look into buying a term life-insurance policy that would cover Elissa and the children during their early years in retirement, Millstone adds. “He needs to crunch the numbers and see,” Millstone says, adding that the family could be covered by their savings.

Overall, both Riley and Millstone agree that their pension and savings should provide enough income to make it possible for them to both stop working in about six years. Any of the savings that they don’t use could be inherited by their children.

In Finance Lab, we pair frustrated readers with financial advisers. Want to participate? Tell us your story or e-mail us at

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